Musk’s Twitter Bid: Brilliant Business or Billionaire’s Infatuation?

Within days, the Tesla maker got what he wanted. It’s not free, but this inveterate tweeter, co-founder of PayPal and owner of Space X, offered US $ 44 billion to buy Twitter. The operation, which is still subject to approval by U.S. regulatory and stock market authorities, will allow him to dominate the little bird’s social network at will. It’s not just that. Facing the billionaire businessman the challenge of proving that Twitter can generate amazing revenueas Facebook, YouTube or Chinese WeChat do.

Musk’s plan for Twitter, whose main source of revenue is advertising, is still unknown. Exactly what the employer itself wants to limit. “It’s hard to imagine that it has any logic aligned with the businesses of Tesla or Space X. But it’s possible that he thinks the social network could be monetizing, which is not the most profitable”, Reflects Diego Martínez Burzaco, head of Research for the Inviu platform.

Twitter numbers aren’t entirely lucky. The latest balance sheets presented on the New York Stock Exchange show that the company earned between 2018 and 2019 nearly US $ 2.7 billion in revenue but over the next two years accumulated red nearly US $ 1,350 millionexactly half. This despite the fact that their income continues to grow. Last year, Twitter had a turnover of just over US $ 5 billion.

Diego Méndez, from Portfolio Personal, clarified that “2018 and 2019 are just the years the company has earned since going publicin 2013 “. Upon learning of Musk’s offer on Twitter, the market reacted with considerable distrust. The agreement establishes that Musk will pay US $ 54.20 for each share of Twitter and this Thursday the price was approximately US $ 48.90. If the gap widens, many believe that it is possible for the operation to fail. If this happens, the tycoon will have to pay a fine of US $ 1,000 million.

“The difference between what he offered and what the value of the action is now provides that there is an 80% probability of completing the transaction. As that difference grows, the probability decreases. Let’s wait a moment. but I think that the matter is not defined at all”, Explained Juan Keser, investment advisor at Silver Cloud Advisors. And he added: “If the numbers are done, it will now be cheaper for Musk to break the agreement and pay the fine.”

Doubts about the future of Twitter are widespread. So far, the bird’s social network is worth 436 million (according to the Hootsuite site), of which Only 229 million are active and “visible”. Méndez recalled that the number was in stark contrast to the 1,930 million real users that Facebook has. “Twitter is not known for being financially sound and 89% of their revenue comes from advertising, ”he said.

Musk didn’t give much hint about his plans on Twitter. But for that social network, of which he is a fan, he mentioned his intention to limit advertising and increase the number of subscribers. He also spoke, vaguely, about reducing operating costs and even suggested convert company headquarters into a homeless residence. Not a message of hope for Twitter’s 7,500 employees.

“Nothing is definitive. Although Musk has already bought 9.2% of the shares on Twitter, I wouldn’t be surprised if one day he got up and reversed the operation. This is not the first time he has taken that step, “said technology disseminator Joan Cwayk. On the other hand, she added that there is a” fear that Musk will neglect Tesla for Twitter attendance “and that is why why his shares fell.

In the social media career, Twitter is lagging behind in the number of users. The leaders are Facebook, YouTube (Google) and WhatsApp, which have also belonged to the group led by Mark Zuckerberg since 2014. That merger is as controversial as Twitter. Facebook is already happening ended up paying $ 22 billion through the communication platform, more than what analysts calculate.

Distrust of Twitter, despite this background, is high. “From a corporate standpoint, Twitter is under some pressure to accelerate the creation of new products. In this scenario, where one of its major competitors, such as Facebook, has announced a significant restructuring in developing the metaverse ”, underlined by Damián Vlassich, an analyst at IOL (InversiónOnLine).

However, the little bird social network has other potential outside the field of business. “Twitter has power and many reach within institutional channels: politicians, analysts, economists, businessmen participate. All of this has unseen value, but it remains to be seen if it can be translated into revenue”, Describes Martínez Burzaco. At this point, Cwayk agrees. He said Musk’s interest in Twitter “may have political intentions in many countries where the entrepreneur has his businesses.”

There are few who believe that getting on the social network has more to do with power than business. “25% of North American adults know Twitter”, Commented the specialist. “He’s the richest man, the most influential, and the social network is a tool that can give him power,” he said. Cwayk recalled that this year there were elections in South Africa (Musk is a native of that country). “And if not now, they might be next,” he risks.

Claudio Zuchoviki maintains a similar thing. He said that “this type of company is very difficult to monetize” and that is why he interprets that Musk’s step has to do with the ego, a whim of a billionaire who could spend US $ 44,000 million to indulge. “There is an incomprehensible level, which is the power that networks have. Buying Twitter today implies handling a more powerful medium than traditional media”, the expert considers.

The reference of a generation of wealthy and Twitter users

Nearing 51, Elon Musk is a true high-tech rock star. The disgusting symbol of the era of social networks and a real headache for the regulatory bodies of the stock markets. The reason is that in just one tweet, he can countless times, he makes or breaks the price of a stock or cryptocurrency, such as bitcoin. It does this with the power of its messages. To date, Musk has nearly 89 million followers on Twitterthe social network you closely control.

Born in Pretoria in 1971, South Africa, and owner of the largest fortune on the planet (US $ 259,000 million), the creator of Tesla is an exponent of the new generation of entrepreneurial “influencers”, including Twitter founder, Jack Dorsey. They contrast the profile of “old” technological evangelists, like Bill Gates, Steve Jobs and even Jeff Bezos. Is that why Musk wants to buy Twitter? To further increase your influence in the world of social networks?

That’s one of the speculations and versions circulating on Wall Street. So far, this Friday it happened that Musk sold an additional US $ 4.5 billion in Tesla shares (he is carrying US $ 8.5 billion this week) to collect the US $ 44 billion he offers on Twitter, a company founded in 2006 and barely profitable. Nor should it be surprising.

“Twitter as a company has always been my problem and my biggest regret. It is owned by Wall Street and the advertising model”, Opinion of Dorsey, who has twice been fired from the company he founded. “To solve the problem of being a company, Elon is the only solution I trust,” the businessman tweeted.

This is how he mentioned one of the goals Musk has on Twitter: to get all the shares so that the social network will stop trading the stock market. Or “delist it”, as they say in stock market jargon. Millionaire since 2013 when Twitter went public, Dorsey still owns 2% of the company’s share package. If the deal finally goes ahead, it will pocket approximately $ 860 million. We need to see it.

Once he made the offer officially via the little bird social network, Musk stated his intentions vaguely. “Freedom of expression is the basis of a functioning democracy and Twitter is the digital public square where important issues for the future of humanity are debated,” the businessman said, adding that the little bird social network “has tremendous potential and I hope work with the company and the user community to unlock it”.

Amazon owner Jeff Bezos jumped at the chance. In a series of hilarious tweets, the billionaire wondered if buying on Twitter would make Tesla’s business in China harder for him. “interesting question Did the Chinese government have just a little bit of influence in the town square? “said Bezos, owner of the Washington Post, referring to Musk’s ideas. Bezos himself responded: “The most likely outcome in this matter is the complexity in China for Tesla, rather than censorship on Twitter”.

Chicano makes a lot of sense. Half of Tesla’s electric cars are made at the Shanghai plant.